Germany’s energy policies are often praised by environmentalists and criticized by economists. Since 2000, when the German Renewable Energies Law (EEG) was introduced, electricity produced from renewable sources in Germany has increase from 6.3 per cent to about 23.4 per cent in 2013. But this was only possible through heavy subsidization and resulted in soaring energy prices. Retail electricity prices have risen from 0.14 to almost 0.29 Euro/kWh, according to data released by the Association of Energy and Water Industries (BDEW). Renewable energy providers are guaranteed a fixed, above market purchase price know as feed-in tariffs (FIT) similar to Ontario regulations. The trade-off between high energy prices and environmental protection is a topic of heated debate.
However, a new study from Germany’s Fraunhofer Institute for Solar Energy Systems titled “Levelized Cost of Electricity – Renewable Energy Technology” has promising results for Germany’s green energy movement. The study analyzed the levelized cost of electricity (LCOE) of renewable energy technologies in the third quarter of 2013 and provides predictions for future cost development through to 2030 based on technology-specific learning curves and market scenarios.
According to the study, photovoltaics (PV) power plants reached a LCOE between 0.078 and 0.142 Euro/kWh depending on the type of power plant. The current LCOE for onshore wind power are between 0.045 and 0.107 Euro/kWh. Since offshore wind power have higher installation and operating costs it showed a considerably higher LCOE between 0.119 and 0.194 Euro/kWh. The LCOE from biogas power plants is between 0.135 Euro/kWh and 0.215 Euro/kWh.
In comparison, the LCOE for brown coal is at 0.038 to 0.053 Euro/kWh, from hard coal at 0.063 to 0.080 Euro/kWh, and from combined cycle gas turbine (CCGT) power plates at 0.075 to 0.098 Euro/kWh. The range in the values are dependent on the assumed fill load hours of the conventional power plant.
These results show that wind power at good onshore wind locations already has lower costs than new hard coal or CCGT power plants. Even more promising are results form the future development of the LCOE in Germany through 2030.
The German study predicts that the LCOE of PV power plants will fall to the range of 0.055 to 0.094 Euro/kWh. This means that even small rooftop PV systems will be able to compete with onshore wind power. On the other hand, the LCOE of brown coal is expected to reach 0.06 to 0.08 Euro/kWh, hard coal between 0.08 to 0.11 Euro/kWh, and CCGT power plants will grow to 0.09 to 0.12 Euro/kWh. The study predicts that Southern Germany PV power plants will drop considerably below the average LCOE for all fossil fuel power plants by 2030.
The LCOE from onshore wind power that is already at a very low level is not expected to drop substantially in the future. But because of the expected rising cost of fossil fuel power plant, onshore wind power at locations with favourable wind conditions will reach parity with that of brown coal power plants by 2020 at the latest. Offshore wind power still has a great potential for reducing costs, with a LCOE between 0.096 and 0.151 Euro/kWh by 2030.
The concept of LCOE, presented in this study, allows the accurate comparison of different technologies. But it should not be equated with the feed-in compensation. LCOE cannot represent the spot value of electricity as that is determined by the daily and hourly variations and weather-related fluctuations in supply and demand.
Nonetheless, these predictions spell positive results for Germany’s energy future.
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